Trust and strong ties in the selection and evaluation of business advisors by small firms

Principal Topic A small firm is unlikely to possess internally the full range of knowledge and skills that it requires or could benefit from for the development of its business. The ability to acquire suitable external expertise - defined as knowledge or competence that is rare in the firm and acquired from the outside - when needed thus becomes a competitive factor in itself. Access to external expertise enables the firm to focus on its core competencies and removes the necessity to internalize every skill and competence. However, research on how small firms access external expertise is still scarce. The present study contributes to this under-developed discussion by analysing the role of trust and strong ties in the small firm's selection and evaluation of sources of external expertise (henceforth referred to as the 'business advisor' or 'advisor'). Granovetter (1973, 1361) defines the strength of a network tie as 'a (probably linear) combination of the amount of time, the emotional intensity, the intimacy (mutual confiding) and the reciprocal services which characterize the tie'. Strong ties in the context of the present investigation refer to sources of external expertise who are well known to the owner-manager, and who may be either informal (e.g., family, friends) or professional advisors (e.g., consultants, enterprise support officers, accountants or solicitors). Previous research has suggested that strong and weak ties have different fortes and the choice of business advisors could thus be critical to business performance) While previous research results suggest that small businesses favour previously well known business advisors, prior studies have also pointed out that an excessive reliance on a network of well known actors might hamper business development, as the range of expertise available through strong ties is limited. But are owner-managers of small businesses aware of this limitation and does it matter to them? Or does working with a well-known advisor compensate for it? Hence, our research model first examines the impact of the strength of tie on the business advisor's perceived performance. Next, we ask what encourages a small business owner-manager to seek advice from a strong tie. A recent exploratory study by Welter and Kautonen (2005) drew attention to the central role of trust in this context. However, while their study found support for the general proposition that trust plays an important role in the choice of advisors, how trust and its different dimensions actually affect this choice remained ambiguous. The present paper develops this discussion by considering the impact of the different dimensions of perceived trustworthiness, defined as benevolence, integrity and ability, on the strength of tie. Further, we suggest that the dimensions of perceived trustworthiness relevant in the choice of a strong tie vary between professional and informal advisors. Methodology/Key Propositions Our propositions are examined empirically based on survey data comprising 153 Finnish small businesses. The data are analysed utilizing the partial least squares (PLS) approach to structural equation modelling with SmartPLS 2.0. Being non-parametric, the PLS algorithm is particularly well-suited to analysing small datasets with non-normally distributed variables. Results and Implications The path model shows that the stronger the tie, the more positively the advisor's performance is perceived. Hypothesis 1, that strong ties will be associated with higher perceptions of performance is clearly supported. Benevolence is clearly the most significant predictor of the choice of a strong tie for external expertise. While ability also reaches a moderate level of statistical significance, integrity does not have a statistically significant impact on the choice of a strong tie. Hence, we found support for two out of three independent variables included in Hypothesis 2. Path coefficients differed between the professional and informal advisor subsamples. The results of the exploratory group comparison show that Hypothesis 3a regarding ability being associated with strong ties more pronouncedly when choosing a professional advisor was not supported. Hypothesis 3b arguing that benevolence is more strongly associated with strong ties in the context of choosing an informal advisor received some support because the path coefficient in the informal advisor subsample was much larger than in the professional advisor subsample. Hypothesis 3c postulating that integrity would be more strongly associated with strong ties in the choice of a professional advisor was supported. Integrity is the most important dimension of trustworthiness in this context. However, integrity is of no concern, or even negative, when using strong ties to choose an informal advisor. The findings of this study have practical relevance to the enterprise support community. First of all, given that the strength of tie has a significant positive impact on the advisor's perceived performance, this implies that small business owners appreciate working with advisors in long-term relationships. Therefore, advisors are well advised to invest into relationship building and maintenance in their work with small firms. Secondly, the results show that, especially in the context of professional advisors, the advisor's perceived integrity and benevolence weigh more than ability. This again emphasizes the need to invest time and effort into building a personal relationship with the owner-manager, rather than merely maintaining a professional image and credentials. Finally, this study demonstrates that the dimensions of perceived trustworthiness are orthogonal with different effects on the strength of tie and ultimately perceived performance. This means that entrepreneurs and advisors should consider the specific dimensions of ability, benevolence and integrity, rather than rely on general perceptions of trustworthiness in their advice relationships.

What value do users derive from social network applications?

Research on social networking sites like Facebook is emerging but sparse. This exploratory study investigates the value users derive from self-described ‘cool’ Facebook applications, and explores the features that either encourage or discourage users to recommend applications to their friends. The concepts of value and cool are explored in a social networking context. Our qualitative data reveals consumers derive a combination of functional value along with either social or emotional value from the applications. Female Facebook users indicate self-expression as important motivators, while males tend to use Facebook applications to socially compete. Three broad categories emerged for application features; symmetrical features can both encourage or discourage recommendation, polar features where different levels of the same feature encourage or discourage, and uni-directional features only encourage or discourage but not both. Recommending or not recommending an application tends to be the result of a combination of features and context, rather than one feature in isolation.

The roles and importance of formal and informal sources of business support in young firms : evidence from the UK’s 2008 Federation of Small Business Survey

Objectives This research explores the relationship between young firms, their growth orientation-intention and a range of relationships which can be seen to provide business support. Prior-work Research indicates that networks impact the firm’s ability to secure resources (Sirmon and Hitt 2003; Liao and Welsch. 2004; Hanlon and Saunders 2007). Networks have been evaluated in a number of ways ranging from simple counts to characteristics of their composition (Davidsson and Honig 2003), strength of relationships (Granovetter 1973) and network diversity (Carter et al 2003). By providing access to resources and knowledge (from start-up assistance and raising capital, (e.g. Smallbone et al, 2003), networks may assist in enabling continued persistence during those times where firms may experience resource constraints owing to firm growth (Baker and Nelson 2005). Approach The data used in this research was generated in the 2008 UK Federation of Small Businesses (FSB) survey. Over 1,000 of the firms responding were found to fall into the category of “young”, ((defined as firms under 4 years old). Firms were considered the unit of analysis with the entrepreneur being the chief spokesperson for the firm. Preliminary data analysis considered key demographic characteristics and industry classifications, comparing the FSB data with that of the UK government’s own (BERR) Small Business Surveys of 2007 and 2008, to establish some degree of representativeness of the respondents. The analysis then examined networks with varying potential ability to provide support for young firms, the networks measured in terms of number, diversity, characteristic and strength in its relationship to young firm growth orientation. The diversity of business-support-related relationships ranged from friends and family, through professional services, customers and suppliers, and government business services, to trade associations and informal business networks. The characteristics of these formal and informal sources of support for new businesses are examined across a range of business support-type activities for new firms. The number of relationships and types of business support are also explored. Finally, the strength of these relationships is examined by analysis of the source of business support, type of business support, and links to the growth orientation-intention of the firm, after controlling for a number of key variables related to firm and industry status and owner characteristics. Results Preliminary analysis of the data by means of univariate analysis showed that average number of sources of advice was around 2.5 (from a potential total of 6). In terms of the diversity of relationships, universities had by far the smallest percentage of firms receiving beneficial advice from them. Government business services were beneficially used by 40% of young firms, the other relationship types being around the 50-55% mark. In terms of characteristics of the advice, the average number of areas in which benefit was achieved was around 5.5 of a maximum of 15. Start-up advice has by far the highest percentage of firms obtaining beneficial advice, with increasing sales, improving contacts and improving confidence being the other categories at or around the 50% mark. Other market-focused areas where benefits were also received were in the areas of new markets, existing product improvements and new product improvements, where around 40% of the young responding firms obtained benefit. Regression techniques evaluating the strength of these relationships in terms of the links between business support (by source of support, type of support, and range of support) and firm growth orientation-intention focus highlighted a number of significant relationships, even after controlling for a range of other explanatory variables identified in the literature. Specifically, there was found to be a positive relationship between receiving business advice generally (regardless of type or source) and growth orientation. This relationship was seen to be stronger, however, when looking at the number of types of beneficial advice received, and stronger again for the number of sources of this advice. In terms of individual sources of advice, customers and suppliers had the strongest relationship with growth, with Government business services also found to be significant. Combining these two sources was also seen to increase the strength of the relationship between these two sources of advice and growth orientation. In considering areas of support, growth was most strongly positively related to advice that benefited the development of new products and services, and also business confidence, but was negatively related to advice linked to business recovery. Finally, amalgamating the 4 key types and sources of advice to examine the impact of combinations of these types and sources of advice also improved the strength of the relationship. Implications The findings will assist in the understanding of young firms in general and growth more specifically, particularly the role and importance of specific sources, types and combinations of business support used more extensively by new young growth-oriented firms. Value This research may assist in processes designed to allow entrepreneurs to make better decisions; educators and support organizations to develop better advice and assistance, and Governments design better conditions for the creation of new growth-oriented businesses.

The impact of institutional, instrumental and interpersonal underpinnings on network dynamics and outcomes

Networks form a key part of the infrastructure of contemporary governance arrangements and, as such, are likely to continue for some time. Networks can take many forms and be formed for many reasons. Some networks have been explicitly designed to generate a collective response to an issue; some arise from a top down perspective through mandate or coercion; while others rely more heavily on interpersonal relations and doing the right thing. In this paper, these three different perspectives are referred to as the “3I”s: Instrumental, Institutional or Interpersonal. It is proposed that these underlying motivations will affect the process dynamics within the different types of networks in different ways and therefore influence the type of outcomes achieved. This proposition is tested through a number of case studies. An understanding of these differences will lead to more effective design, management and clearer expectations of what can be achieved through networks.

Network structure, knowledge governance, and firm performance : evidence from innovation networks and SMEs in the UK

It is increasingly understood that learning and thus innovation often occurs via highly interactive, iterative, network-based processes. Simultaneously, economic development policy is increasingly focused on small and medium-sized enterprises (SMEs) as a means of generating growth, creating a clear research issue in terms of the roles and interactions of government policy, universities, and other sources of knowledge, SMEs, and the creation and dissemination of innovation. This paper analyses the contribution of a range of actors in an SME innovation creation and dissemination framework, reviewing the role of various institutions therein, exploring the contribution of cross-locality networks, and identifying the mechanisms required to operationalise such a framework. Bivariate and multivariate (regression) techniques are employed to investigate both innovation and growth outcomes in relation to these structures; data are derived from the survey responses of over 450 SMEs in the UK. Results are complex and dependent upon the nature of institutions involved, the type of knowledge sought, and the spatial level of the linkages in place but overall highlight the value of cross-locality networks, network governance structures, and certain spillover effects from universities. In general, we find less support for the factors predicting SME growth outcomes than is the case for innovation. Finally, we outline an agenda for further research in the area.

Impact of embeddedness in co-ethnic & non co-ethnic networks on business performance : evidence from Chinese immigrant entrepreneurs in Australia

This paper investigates the research question ‘What is the effect of co-ethnic and non coethnic networking on business performance in Chinese immigrant businesses?’ The research will discuss key themes such as the extent to which Chinese immigrant entrepreneurs are embedded in co-ethnic and non co-ethnic networks and the affect of embeddedness on business performance, such as the entrepreneur’s satisfaction and business growth. Research on immigrant entrepreneurship has emerged as an important new area of inquiry within the field of entrepreneurship. The increased importance of the subject is due in part to major immigrant receiving countries, such as Australia, the United States and Canada, experiencing a high growth rate in their immigrant population. Reflecting on the existing research on immigrant entrepreneurship, it was decided to investigate the role of embeddedness on entrepreneurial business performance. This research seeks to identify the impact of embeddedness in co-ethnic and non co-ethnic networks on business performance of Chinese immigrant entrepreneurs in Australia. Chinese immigrant restaurant entrepreneurs in southeast Queensland, Australia were studied. The result expands on existing research on immigrant entrepreneurship, since the majority of immigrant entrepreneurship studies have been conducted on the United States and Canada immigrant experiences, but few have been conducted in the Australian immigrant entrepreneur context. This thesis also adds empirical testing to a research area with little empirical testing. The results indicated that embeddedness in the co-ethnic network is positively related to business performance measured by both growth and satisfaction. Embeddedness in the non co-ethnic network of the Chinese immigrant entrepreneurs in Australia did not show a similar pattern in accordance with studies conducted in the United States and Canada. This result is interesting and creates the opportunity for future research employing a comparative study.

Network

Network has emerged from a contempory worldwide phenomenon, culturally manifested as a consequence of globalization and the knowledge economy. It is in this context that the internet revolution has prompted a radical re-ordering of social and institutional relations and the associated structures, processes and places which support them. Within the duality of virtual space and the augmentation of traditional notions of physical place, the organizational structures pose new challenges for the design professions. Technological developments increasingly permit communication anytime and anywhere, and provide the opportunity for both synchronous and asynchronous collaboration. The resultant ecology formed through the network enterprise has resulted in an often convolted and complex world wherein designers are forced to consider the relevance and meaning of this new context. The role of technology and that of space are thus interwined in the relation between the network and the individual workplace. This paper explores a way to inform the interior desgn process for contemporary workplace environments. It reports on both theoretical and practical outcomes through an Australia-wide case study of three collaborating, yet independent business entities. It further suggests the link between workplace design and successful business innovation being realized between partnering organizations in Great Britain. Evidence presented indicates that, for architects and interior designers, the scope of the problem has widened, the depth of knowledge required to provide solutions has increased, and the rules of engagement are required to change. The ontological and epistemological positions adopted in the study enabled the spatial dimensions to be examined from both within and beyond the confines of a traditional design only viewpoint. Importantly it highlights the significance of a trans-disiplinary collaboration in dealing with the multiple layers and complexity of the contemporary social and business world, from both a research and practice perspective.

Integrating the resource-based view and transaction cost economics in immigrant business performance

This paper presents a new integrated framework that integrates the resource-based view and transaction cost economics to explain the phenomenon of immigrant entrepreneurship. We extend the existing literature on immigrant entrepreneurship by identifying different types of ethnic network resources and demonstrating how these resources interact with transaction costs in the context of Chinese immigrants. Thus, our study contributes to the literature by providing a theoretical framework which identifies mechanisms immigrant entrepreneurs use to strategically deploy resources to minimize costs and maximize performance outcomes.

Contexts, hybrids and network governance : a comparison of three case-studies in infrastructure governance

While hybrid governance arrangements have been a major element of organisational architecture for some time, the contemporary operating environment has brought to the fore new conditions and expectations for the governance of entities that span conventional public sector departments, private firms and community organisations or groups. These conditions have resulted in a broader array of mixed governance configurations including Public Private Partnerships, alliances, and formal and informal collaborations. In some such arrangements, market based or ‘complete’ contractual relationships have been introduced to replace or supplement existing traditional ‘hierarchical’ and/or newer relational ‘network-oriented’ institutional associations. While there has been a greater reliance on collaborative or relational contracts as an underpinning institutional model, other modes of hierarchy and market may remain in operation. The success of these emergent hybrid forms has been mixed. There are examples of hybrids that have been well adopted, achieving the desired goals of efficiency, effectiveness and financial accountability; while others have experienced implementation problems which have undermined their results. This paper postulates that the cultural and institutional context within which hybrids operate may contribute to the implementation processes employed and the level of success attained. The paper explores hybrid arrangements through three cases of the use of inter-organisational arrangements in three different national contexts. Distilling the various elements of hybrids and the impact of institutional context will provide important insights for those charged with the responsibility for the formation and key infrastructure and public value development.

Social network market : storytelling on a Web 2.0 original literature site

This article looks at a Chinese Web 2.0 original literature site, Qidian, in order to show the coevolution of market and non-market initiatives. The analytic framework of social network markets (Potts et al., 2008) is employed to analyse the motivations of publishing original literature works online and to understand the support mechanisms of the site, which encourage readers’ willingness to pay for user-generated content. The co-existence of socio-cultural and commercial economies and their impact on the successful business model of the site are illustrated in this case. This article extends the concept of social network markets by proposing the existence of a ripple effect of social network markets through convergence between PC and mobile internet, traditional and internet publishing, and between publishing and other cultural industries. It also examines the side effects of social network markets, and the role of market and non-market strategies in addressing the issues.

Board network characteristics and company performance in Sweden : the case of Gnosjö companies and their board members in southern Sweden

When managers of entrepreneurial companies typically talk about strategies, they first consider what products to make and secondly where to locate the business. The entrepreneurial companies locate in rural areas because of a wish to maintain a certain lifestyle, or because they can combine a resource available there with certain knowledge or interest that they have (Getz and Nilsson, 2004). In addition, many managers of entrepreneurial companies are confident in locating in a rural area, because there often is economic and social structure supportive of local corporate governance. The most central part of corporate governance is the board of directors. In an entrepreneurial company in a rural area, such members of boards are most likely to be individuals in dominant positions influential in the local economy.

Human resource behaviour simulation in business processes

The structure and dynamics of a modern business environment are very hard to model using traditional methods. Such complexity raises challenges to effective business analysis and improvement. The importance of applying business process simulation to analyze and improve business activities has been widely recognized. However, one remaining challenge is the development of approaches to human resource behavior simulation. To address this problem, we describe a novel simulation approach where intelligent agents are used to simulate human resources by performing allocated work from a workflow management system. The behavior of the intelligent agents is driven a by state transition mechanism called a Hierarchical Task Network (HTN). We demonstrate and validate our simulator via a medical treatment process case study. Analysis of the simulation results shows that the behavior driven by the HTN is consistent with design of the workflow model. We believe these preliminary results support the development of more sophisticated agent-based human resource simulation systems.